According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. There are some nuances in how this number is calculated—most employees can be excluded, for example—but Tesla likely has more than 2,000 shareholders under any reasonable definition.

Historically, this requirement has been a significant factor in the largest tech companies going public. Google and Facebook were both forced to go public by an earlier version of the rule, which set the threshold at 500 employees. The cap was raised to 2,000 after Facebook's IPO, but it's likely that Tesla has more than 2,000 investors.

This part confuses me: is the requirement employee count-based or investor count-based?

I think one major difference between being private and being public in the case of Tesla is that in the former case you have investors who are in because they want the company to succeed (and profit from that) while in the latter you get lots of people who want the company to fail (and profit from that). And Tesla has become such a focus point of all the insecurities that come with the sweeping changes in our car and energy industries that the shorters have it very easy to beat all of that into a nice froth of fear, uncertainty and doubt.

But of course all the good reasons for doing what Musks wants to do don't make it any easier to actually do it.

According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. There are some nuances in how this number is calculated—most employees can be excluded, for example—but Tesla likely has more than 2,000 shareholders under any reasonable definition.

Historically, this requirement has been a significant factor in the largest tech companies going public. Google and Facebook were both forced to go public by an earlier version of the rule, which set the threshold at 500 employees. The cap was raised to 2,000 after Facebook's IPO, but it's likely that Tesla has more than 2,000 investors.

This part confuses me: is the requirement employee count-based or investor count-based?

Can't be employees since (private) SpaceX has 6000 employees. That are shareholders. Hmm.

It seems to me that the plan in Elon’s head is to turn Tesla from a public company into a benevolent Ponzi scheme. The other thing is that if the plan is to take Telsa private, the shorts he hates so much knock the price down and make that goal easier.

Most likely, with my English to Musk translation googles on, his statements are meant to hurt the shorters by driving up the price by artificial means. In which case, I will point out that people have gone to jail for things like that.

The Fidelity structure is an interesting approach, but it’s also a very transparent attempt to wiggle out of regulations.

If you have over 2,000 investors, you’re subject to oversight and extensive reporting requirements so the little guy doesn’t get left in the dark. By publically announcing “hey guys, what if you all pool together as a fund so you count as one investor instead of thousands?”, you’re being brazenly honest about your intention to sidestep rules you don’t like.

The upside for these individual investors is murky. You are being offered the following deal: “I want to rid myself of regulatory obligations to give you timely information. I also want to make it significantly harder for you to cash out your investment. Valuation of your investment will no longer be a transparent, updated-by-the-minute affair made by the markets but rather an opaque and highly technical estimate by consultants. But look at the bright side: short sellers will stop publishing biased negative articles about us!”

I totally get why Elon (or any CEO) would like to take their business private. I also understand the way he’s trying to structure it (though I doubt the SEC will like it). But I really don’t understand why a rational investor looking out for his own interests would get behind this. Other than the (minority) “I believe in Elon and his mission and also feel bad when short sellers diss Tesla”, who are emotionally vested enough to push through, I don’t see why an investor would voluntarily give up their current liquidity and transparency.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

But then Tesla would still be a public company. If what he said yesterday was a lie then he becomes liable for losses attributable to that misstatement. Getting rid of shorts is ok. Causing them losses by untrue statements is not ok.

The Fidelity structure is an interesting approach, but it’s also a very transparent attempt to wiggle out of regulations.

If you have over 2,000 investors, you’re subject to oversight and extensive reporting requirements so the little guy doesn’t get left in the dark. By publically announcing “hey guys, what if you all pool together as a fund so you count as one investor instead of thousands?”, you’re being brazenly honest about your intention to sidestep rules you don’t like.

The upside for these individual investors is murky. You are being offered the following deal: “I want to rid myself of regulatory obligations to give you timely information. I also want to make it significantly harder for you to cash out your investment. Valuation of your investment will no longer be a transparent, updated-by-the-minute affair made by the markets but rather an opaque and highly technical estimate by consultants. But look at the bright side: short sellers will stop publishing biased negative articles about us!”

I totally get why Elon (or any CEO) would like to take their business private. I also understand the way he’s trying to structure it (though I doubt the SEC will like it). But I really don’t understand why a rational investor looking out for his own interests would get behind this. Other than the (minority) “I believe in Elon and his mission and also feel bad when short sellers diss Tesla”, who are emotionally vested enough to push through, I don’t see why an investor would voluntarily give up their current liquidity and transparency.

It works for all the tax dodging companies though. (Ok, different legal field, but the idea is the same - if you don't like something, keep finding ways around it until it changes, or you can't avoid it anymore).

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

So...say your are working outdoors and you are constantly dealing with these irritating swarms of gnats coming from the hedges. They probably won't keep you from getting your yard work done, but they are distracting you from the primary goal by making you focus on short term activities like keeping the gnats out of your eyes. As an engineer, you want to get back to the primary goal and you want to make sure the fix...sticks, so instead of swatting the gnats away, you remove their home, the hedges, from the yard.

Its a weird thought, but increasingly, Musk reminds me of Donald Trump: impulsive, irrational, and with as much self control as a 5 year old. And it's getting to be a weekly affair now.

Really, what was the point of that tweet? He just couldn't hold back?

The CEO of a public company needs a certain level of cool headedness, and am no longer sure Musk has it. Or is there something else going on his private life, that we are not aware of? Why is he piling up so many unforced errors, week after week?

Musk needs a thermostat. I wish he would hand over hand his CEO jobs to someone like Shotwell, and just become an evangelist and cheerleader for his companies. We need him too much, and he's just becoming a distraction and stumbling block to his own welfare.

The inability to support small shareholders’ desire to continue owning a stake would be a tiny snag. Worst case, a few insignificant people (like myself) will be disappointed that their investment stopped gaining in value. The larger institutional shareholders can stay on if they wish without any worries.

If fidelity wants to make a new-energy mutual fund with investment in Tesla and other such companies, I’ll move that cash to there, no problem.

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

At a $420 price, the market cap is $70 billion. Plus $5-10 for the outside money he needs so yeah I am pretty close.

I don’t doubt that Elon works hard. I am noting that he seems to be in love with the sound of his own voice and shoots himself in the foot to the detriment of his shareholders. I have enough of that form of egotistical idiocy from the current president.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

As long as the short sellers can buy and sell Tesla shares, they can continue to function. As per this scheme, there will still be tons of buying and selling going on. Sure, if it isn’t listed on a stock exchange that would make it somewhat harder for you or I to short the stock, but Musk and his defenders claim these are super sophisticated short sellers with institutional backing not regular people who happen to be bearish on Tesla. If that’s true, this won’t stop them.

If Musk wants to focus more on execution, here’s some ideas— don’t call people pedophiles. Don’t trash the media. Don’t even read the media. Don’t get in flame wars. Get off Twitter. Don’t start a new venture every year. Hire someone who knows how to mass produce cars and give them some breathing room rather than sleeping at the factory micromanaging everything. Musk can build focus in so many ways.

"According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. "

And Musk may be fine with that. I think this is about getting rid of the shorters more than getting rid of quarterly reports.

As long as the short sellers can buy and sell Tesla shares, they can continue to function. As per this scheme, there will still be tons of buying and selling going on. Sure, if it isn’t listed on a stock exchange that would make it somewhat harder for you or I to short the stock, but Musk and his defenders claim these are super sophisticated short sellers with institutional backing not regular people who happen to be bearish on Tesla. If that’s true, this won’t stop them.

If Musk wants to focus more on execution, here’s some ideas— don’t call people pedophiles. Don’t trash the media. Don’t even read the media. Don’t get in flame wars. Get off Twitter. Don’t start a new venture every year. Hire someone who knows how to mass produce cars and give them some breathing room rather than sleeping at the factory micromanaging everything. Musk can build focus in so many ways.

You make a ton of sense. There is a way to beat the shorts. Hit your numbers, do the job, improve the products and the ecosystem. And the stock price will go up, and the shorts will go away.

The problem is that he seems to be interested in responding to stupid and silly things too much.

I think one major difference between being private and being public in the case of Tesla is that in the former case you have investors who are in because they want the company to succeed (and profit from that) while in the latter you get lots of people who want the company to fail (and profit from that). And Tesla has become such a focus point of all the insecurities that come with the sweeping changes in our car and energy industries that the shorters have it very easy to beat all of that into a nice froth of fear, uncertainty and doubt.

But of course all the good reasons for doing what Musks wants to do don't make it any easier to actually do it.

Stock shorts are a bit of a red herring here. Private or public, if you own shares of a company, it's because you want them to succeed. There are going to be people who short TSLA, but every stock gets shorted and nobody makes a big fuss out of it like Elon does. There are plenty of good reasons to go private, but people shorting your stock is not one of them.

A short sale fundamentally doesn't affect the share price. The way a short works is you borrow shares from a broker and agree to give the same amount of shares back at a later date. What usually happens is the person doing the short sells the shares immediately, then buys different shares back when it's time to return them. If the stock falls in value like they expect, the short-seller made their money because they returned cheaper shares than they sold in the first place. If the stock price goes up, they could be bankrupt because they have to buy more expensive shares than they originally sold.

The only way a short affects a share's price is if news outlets or high-profile investors run around screaming the sky is falling. If the short is exceptionally large and creates a glut in supply, the share price will dip in trading. But, you'd have to be shorting a lot of TSLA to do that.

TL;DR: Going private for the right reasons can be a good choice. It's not a good choice if you're just tired of the haters and doubters shorting your company. Whenever there's a market for a gamble (such as shorting), some people are going to take it.

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

At a $420 price, the market cap is $70 billion. Plus $5-10 for the outside money he needs so yeah I am pretty close.

I don’t doubt that Elon works hard. I am noting that he seems to be in love with the sound of his own voice and shoots himself in the foot to the detriment of his shareholders. I have enough of that form of egotistical idiocy from the current president.

He owns $14B of that $70B, so that's $14B he doesn't need to bring to the table.

Some of the institutional investors (which I believe are ~half of all shareholders) would probably be fine owning a private Tesla since they'd have the clout to get the same reporting, so he wouldn't have to buy them out either.

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

At a $420 price, the market cap is $70 billion. Plus $5-10 for the outside money he needs so yeah I am pretty close.

I don’t doubt that Elon works hard. I am noting that he seems to be in love with the sound of his own voice and shoots himself in the foot to the detriment of his shareholders. I have enough of that form of egotistical idiocy from the current president.

Well... that's the thing. $420 is the price RIGHT NOW. If somehow this craziness moves forward in any way, you can be sure that that price will go down fairly quickly.

I can't believe I haven't seen anyone mention this. It's been stated that SpaceX investors are not looking for profits or returns on their money until way into the future (20+ years). If they did, do you think they'd be OK with building the BFR with no/very little commercial benefits?

I think Elon is planning on doing something very similar with Tesla. I think Wall Street and the press can only think one way: how do you make money. Instead, I think this is more of a charitable angle to save the planet. And there is a ton of money out there to do something like this.

Its a weird thought, but increasingly, Musk reminds me of Donald Trump: impulsive, irrational, and with as much self control as a 5 year old. And it's getting to be a weekly affair now.

Musk needs a thermostat. I wish he would hand over hand his CEO jobs to someone like Shotwell, and just become an evangelist and cheerleader for his companies. We need him too much, and he's just becoming a distraction and stumbling block to his own welfare.

Another comparison would be that he’s the guy Steve Jobs would have been had Jobs never been fired and never had to spend 10 years in the wilderness at NeXT. Musk is being affected by his own celebrity. There isn’t much evidence that he listens to anyone. One of the things said about Jobs is that before NeXT and especially Pixar he thought he could do everyone’s job better than them— he only needed others to make his life easier. Between the setbacks and seeing people at Pixar create, he learned that other people are good at what they do and he learned when to listen to them.

I suspect Musk is hoping that most of the existing Tesla shareholders will hold on to their shares and become investors in a private Tesla. In this way, he wouldn’t have to come up with any funding.

So the pitch is “Give Elon some multiple of $420 of your money for an asset that you can’t sell, can’t value, can’t get any information on and cannot control. And your only return is that maybe, at some point, when Elon feels like it, you might be able to cash out. Possibly. But hey, you get the satisfaction of having given Elon, (who apparently can’t control himself on twitter) money”

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

At a $420 price, the market cap is $70 billion. Plus $5-10 for the outside money he needs so yeah I am pretty close.

I don’t doubt that Elon works hard. I am noting that he seems to be in love with the sound of his own voice and shoots himself in the foot to the detriment of his shareholders. I have enough of that form of egotistical idiocy from the current president.

Well... that's the thing. $420 is the price RIGHT NOW. If somehow this craziness moves forward in any way, you can be sure that that price will go down fairly quickly.

.

More likely the price goes up. You start taking buyouts, and everybody wants in to get thier piece.

I think Tesla is a good company. Elon has good engineering ideas. I just wish he would put twitter down for a minute and do his job.

As a shareholder and engineer I’m completely fine with this. No successful product in the history of the world was produced by a mob of uninformed laypersons.

As a shareholder, I vote no.

Elon has 3 options:

1) shut up and hit his targets. 2) come up with $75-80 billion to buy us out. 3) cash out and let it be someone else’s problem.

And those engineers you value so much are using my money to do their job. Elon is looking to have his playground and not have to answer to anybody. He sold shares. He no longer owns Tesla the company. He owns shares. Those of us who he sold the shares too would really like him to shut up and get to work.

The required cash would not take 75-80 billion.

Also, are you really accusing this CEO, of all CEOs, of not working hard enough?

At a $420 price, the market cap is $70 billion. Plus $5-10 for the outside money he needs so yeah I am pretty close.

I don’t doubt that Elon works hard. I am noting that he seems to be in love with the sound of his own voice and shoots himself in the foot to the detriment of his shareholders. I have enough of that form of egotistical idiocy from the current president.

He owns $14B of that $70B, so that's $14B he doesn't need to bring to the table.

Some of the institutional investors (which I believe are ~half of all shareholders) would probably be fine owning a private Tesla since they'd have the clout to get the same reporting, so he wouldn't have to buy them out either.

So the total amount needed is (potentially) 20-50% of the market cap.

No they will not be fine. Liquid assets are more valuable than non liquid assets. They will be losing value on their own balance sheets.

"I know of no legal way to offer public shareholders of a listed company an equity security while also going private," (said) Harvard legal scholar John Coates.

Coates is being obtuse. Musk isn't proposing to simultaneously keep the company listed while also taking the company private. This is what's known as a red herring quote, a first cousin to the infamous straw man argument.

Instead, Musk is proposing to delist Tesla, *and* to establish a private fund which holds Tesla shares. Current Tesla share owners who wish to preserve their investment will give up ownership of their direct shares in Tesla and receive shares in the new fund in their place.

That's perfectly legal.

Depending on how the new fund's charter is written, it might or might not have a voting interest in Tesla. I'm guessing it won't, but it could be written either way. There are details to work out, such as how share holders in the new fund will be allowed to cash out in the future, but that's not a difficult task.

The fund will count as one owner in a private Tesla, no matter how many investors have shares in the fund.

The SEC will surely take an interest in how Musk handled this announcement, but it's very unlikely any rules were violated. It's not insider trading, not when Musk has over 20 million Twitter subscribers and his every tweet is national news within hours. It's not a pump-and-dump scheme unless Musk and his co-conspirators start selling shares in Tesla after they went up and he has no intention of actually taking the company private. But nobody seriously thinks that's Musk's purpose. He has a legitimate interest in insulating his company from predatory shorts and Wall Street criticism fueled by defenders of the status quo. If he has private investors lined up, taking Tesla private is almost certainly a good move for Tesla.

Musk may have violated Wall Street's unwritten rules of comportment by using Twitter to make an announcement like this, but he's been violating unwritten rules of comportment all along. His purpose is to violently disrupt markets, not make friends with the fossil fuel-supporting investing community. (For the record, he has few friends, if any, in that crowd.)

According to Sjostrom, companies are required to comply with public-company disclosure rules if they have more than 2,000 shareholders. There are some nuances in how this number is calculated—most employees can be excluded, for example—but Tesla likely has more than 2,000 shareholders under any reasonable definition.

Historically, this requirement has been a significant factor in the largest tech companies going public. Google and Facebook were both forced to go public by an earlier version of the rule, which set the threshold at 500 employees. The cap was raised to 2,000 after Facebook's IPO, but it's likely that Tesla has more than 2,000 investors.

This part confuses me: is the requirement employee count-based or investor count-based?

It is investor count based, but startups often partially compensate employees with shares or options on shares, so there can be a large amount of overlap between employees and shareholders.

Because employees being paid in shares have more access to the company than regular shareholders, they are presumably excluded from the 2000 shareholder limit.

Its a weird thought, but increasingly, Musk reminds me of Donald Trump: impulsive, irrational, and with as much self control as a 5 year old. And it's getting to be a weekly affair now.

Really, what was the point of that tweet? He just couldn't hold back?

The CEO of a public company needs a certain level of cool headedness, and am no longer sure Musk has it. Or is there something else going on his private life, that we are not aware of? Why is he piling up so many unforced errors, week after week?

Musk needs a thermostat. I wish he would hand over hand his CEO jobs to someone like Shotwell, and just become an evangelist and cheerleader for his companies. We need him too much, and he's just becoming a distraction and stumbling block to his own welfare.

I'm fairly sure that having to reach the 5000 cars per week threshold at all costs was what got him finally. I mean, (private) SpaceX has missed numerous promises he made and still the customers are lining up to launch their stuff, which again makes the investors happy. And Tesla has what now? 450.000 reservations for the Model 3? The customers don't seem to care about targets and quarterly results, they just want their cars. Reaching 5000 cars/week two months earlier or two months later is hardly a drop in the bucket at this scale. Actually getting your production lines set up in a way that you can go full steam ahead and scale this up easily is much more important than scrambling and improvising just to hit an arbitrary number at some point.

So I can understand that Musk is furious about having to care more for hitting quarterly targets than for actually getting things done in the long term. But he definitely could have prepared this plan better than he obviously did... and in so far I have to fully agree with you.

Its a weird thought, but increasingly, Musk reminds me of Donald Trump: impulsive, irrational, and with as much self control as a 5 year old. And it's getting to be a weekly affair now.

Really, what was the point of that tweet? He just couldn't hold back?

The CEO of a public company needs a certain level of cool headedness, and am no longer sure Musk has it. Or is there something else going on his private life, that we are not aware of? Why is he piling up so many unforced errors, week after week?

Musk needs a thermostat. I wish he would hand over hand his CEO jobs to someone like Shotwell, and just become an evangelist and cheerleader for his companies. We need him too much, and he's just becoming a distraction and stumbling block to his own welfare.

Maybe it's a problem with the medium of Twitter itself. A well thought out 140 character (or whatever it is now, when I ended my account it was still 140) sentence or two can be poetry. But very few people are good poets. I regularly exchange texts with friends that are misinterpreted and we all know each other pretty well, our style and sense of humor. And that's just people who are on a first name basis. Musk is making the assumption we all know him personally and can figure out what the heck he means. And then it goes through the filters of the pundits and others who try to interpret what was said like they have some enlightened view of the person Tweeting out the message.

The other, larger problem is that because (we assume) he is using his phone or PC on his desk, there's no press or communications people involved. Anything a CEO says is normally filtered through a ton of in-house legal and marketing people to make sure no one is saying anything that might be considered "actionable." And it probably should be that way, because even though the CEO might be good at a few things, it is highly doubtful they are going to be good at communications or securities law. Just as Musk is unlikely to know how to design a suspension arm, and Steve Jobs probably didn't have much to add to the specific aluminum alloy used on the iPhone 4 band other than "this one is good." There's a reason all those people are employed by corporations.

So what I'm getting from this is that corporate accounts for privately held companies aren't on the public record in the States? Or is it like the UK where it's a fairly basic statement and therefore being discounted here?

Here, any privately held Limited* Company has to fill an annual account with Companies House (which makes this data available to the public). But it's a short thing and only includes:

Quote:

- a ‘balance sheet’, which shows the value of everything the company owns, owes and is owed on the last day of the financial year - a ‘profit and loss account’, which shows the company’s sales, running costs and the profit or loss it has made over the financial year- notes about the accounts

Is there a US equivalent, or is it all out of the public realm and only the IRS gets to see it?

* Unlimited Companies do not have to file. But since the stakeholders of Unlimited Companies are responsible for the debts of the company, it's a different kettle of fish. The idea that Limited Companies need a public record is to prevent fraudulently stacking debt into shell corporations where none of the shareholders bear responsibility for said debt. It doesn't stop them, but it makes it easier to catch.

"I know of no legal way to offer public shareholders of a listed company an equity security while also going private," (said) Harvard legal scholar John Coates.

Coates is being obtuse. Musk isn't proposing to simultaneously keep the company listed while also taking the company private. This is what's known as a red herring quote, a first cousin to the infamous straw man argument.

Instead, Musk is proposing to delist Tesla, *and* to establish a private fund which holds Tesla shares. Current Tesla share owners who wish to preserve their investment will give up ownership of their direct shares in Tesla and receive shares in the new fund in their place.

That's perfectly legal.

Depending on how the new fund's charter is written, it might or might not have a voting interest in Tesla. I'm guessing it won't, but it could be written either way. There are details to work out, such as how share holders in the new fund will be allowed to cash out in the future, but that's not a difficult task.

The fund will count as one owner in a private Tesla, no matter how many investors have shares in the fund.

The SEC will surely take an interest in how Musk handled this announcement, but it's very unlikely any rules were violated. It's not insider trading, not when Musk has over 20 million Twitter subscribers and his every tweet is national news within hours. It's not a pump-and-dump scheme unless Musk and his co-conspirators start selling shares in Tesla after they went up and he has no intention of actually taking the company private. But nobody seriously thinks that's Musk's purpose. He has a legitimate interest in insulating his company from predatory shorts and Wall Street criticism fueled by defenders of the status quo. If he has private investors lined up, taking Tesla private is almost certainly a good move for Tesla.

Musk may have violated Wall Street's unwritten rules of comportment by using Twitter to make an announcement like this, but he's been violating unwritten rules of comportment all along. His purpose is to violently disrupt markets, not make friends with the fossil fuel-supporting investing community. (For the record, he has few friends, if any, in that crowd.)

I will put this simply for the hard of thinking, You can't do both at the same time. You can only buy out shareholders and go private. You cannot transfer publicly listed shares to a private fund. You would have to sell and then pay tax and then re invest.